Quote of the Day - VP Biden

You can't make this stuff up.

Well, you could - but why bother? Real life is just as, if not more, entertaining.

This comes from our Vice President, Mr. Joe Biden. He's been on a mission to glorify the "success" of the various stimulus packages. With unemployment now at 9.7% and still climbing, the stimulus packages have already failed on at least one of the key claims - that unemployment would not surpass 8% - so I'm still not clear on exactly which points Mr. Biden marks the success.

You may recall from a couple of my earlier posts on the subject [A Not-So-Stimulating Post, That Makes One of Us, FDCO Volume Two, and My Share?] that I believe the stimulus money was not allocated to areas that would actually stimulate the economy. Much of the money was assigned to unemployment benefits, food stamps, and Medicare. Perhaps it is just semantics, but to me, "stimulus" implies some relatively small action that sparks a much larger, mostly self-sustaining reaction. Like providing the spark to ignite a fire.

This is from Brett J. Blackledge of the Associated Press. 

Biden exercised some restraint in his praise for the stimulus' impact. He took a more cautious approach, for example, when asked if his declaration of stimulus success means Americans can now rethink the common view that government is wasteful and inefficient. [italics mine]

"I think it's too early to make that decision, to be very blunt about it, " he said.

That's a classic. Biden: we saved all of humanity from economic implosion, but let's not get too carried away with the praise.

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My Share?

Yahoo! ran a feature on its home page over the weekend offering advice on the "Top Five Ways to Get Your Share of the Stimulus" by Amelia Gray.

I don't know Ms. Gray, and I certainly do not mean any disrespect toward her or Yahoo! specifically. But I take issue with the very premise of the story. By no means is this the first I've heard this phrase, "your share of the stimulus".

Just what exactly is my share? I can calculate my share of stock in my company based on the amount in my portfolio compared to the number of shares outstanding. If I were in one of those winning lottery pools I would know what my share was - 1/nth of the jackpot, where "n" is the number is people in my pool. When dining with friends, my share of the bill is based on the price of the food I consume.

So is not "my share" of the stimulus is equal to whatever additional financial burden I suffer as a result?

The tally of the bailouts/stimulus is, I believe, near $3 trillion. There are roughly 300 million people in the U.S. (though the majority do not pay taxes). For our purposes, let's assume every single citizen works, receives the same salary, and pays the same amount of taxes. The $3 trillion burden shared equally among all hypothetical taxpayers comes to $10,000 apiece.

If you take $10,000 out of my budget, guess what? I'm going to spend $10,000 less than I otherwise would have. That amounts to $45 billion taken from my state's economy.

So I figure "my share" for my family of five is $50,000 (again, in this hypothetical situation where each citizen shares equally in the cost). I'd like "my share" direct-deposited into my checking account. Better yet, why not save everyone the hassle and spare us the administrative costs at the same time? Let me keep my share in the first place. Let everyone keep their share.

The government aims to create jobs, get money into the hands of the people, and spark spending, investment, and the like. Newsflash! The money is already in the hands of the people. To paraphrase nationally syndicated radio talk show host and all-around good guy, Lars Larson, why does the government believe it is better able to spend our money than we are? They've proven they are capable of spending money in very large amounts and very quickly, but their own financial records prove they are definitely not "better" at it than we are.

As Milton Friedman, the late Nobel Prize and Presidential Medal of Freedom recipient, once explained to Phil Donahue,

"The great achievements of civilization have not come from government bureaus . . ."

Here is the full video. It's only 2.5 minutes long and, I think, VERY entertaining. Donahue is left speechless. This footage is from 1979. Except for the clothes, and Donahue's hair, you might think the clip was from last Friday.

Thanks to Newsmax.com for the history lesson.

From the Desk of Captain Obvious - Volume Two

Warning that the global recession is deepening, the Obama administration on Wednesday called on major U.S. allies to do their part and support strong stimulus programs to fight the downturn. The administration said decisive action was needed by all countries to complement what is being done in the United States. Treasury Secretary Timothy Geithner outlined an ambitious agenda, including a tenfold increase in the size of an emergency fund the International Monetary Fund uses to help countries in trouble to as much as $500 billion.

[Ducheznee] And why not, right? I mean, the stimulus plan has miraculously turned our entire economy around. Maybe if every other country were to do the same, and each country becomes indebted to the next, we could all simply call it even and forgive everyone's debt. Problem solved! All of the spending of the stimulus - none of the responsibility. Am I right or am I right?

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Furthermore, a poll from Rasmussen reports that 62% of voters want more tax cuts and less government spending in the plan. 

[Ducheznee] So, if I were to round up 100 people, Rasmussen is telling me that 38 of them want to pay MORE taxes? I'd like to see that.

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The Treasury is tussling with the worst problems in decades, stemming from careless lending that helped fuel a housing crisis that has now dragged the U.S. economy and much of the rest of the world into deep recession.

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At its core, the legislation is designed to ease the worst economic recession in generations, and combines hundreds of billions of dollars in new spending with tax cuts. Much of the money would go for victims of the recession in the form of food stamps, unemployment compensation and health care. 

[Ducheznee] Where's the "stimulus" here?

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U.S. Treasury Secretary Timothy Geithner said Tuesday it is imperative for the government to reduce over time the debt that is piling up as a result of the government's response to recession and financial market turmoil.

[Ducheznee] Secretary Geithner, everybody. Let's give him a hand. [polite applause]

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Despite the Obama administration's claim that its budget wouldn't raise taxes on families earning less than $250,000 a year, "the budget before us assumes large amounts of money" from the climate-change legislation, Rep. Dave Camp of Michigan, the top Republican on the tax-writing House Ways and Means Committee, said at a hearing Tuesday. "And that means higher prices for Americans for food, for gas, for electricity, and in a state like Michigan for home heating -- pretty much anything that they buy."

[Ducheznee] Taxes come in many forms.

 

That Makes One of Us

President Obama today assured the American people that he knows "we did the right thing" by way of the $787 billion stimulus bill.

To make this proclamation, the President boarded Air Force One* and flew 300 miles to Columbus, Ohio to tell a graduating class of police cadets that their jobs are a direct result of the stimulus bill. At least until the end of the year when the funding dries up. The claim was not without substantial evidence to support it - he first looked into the recruits' eyes and at their shiny new badges before making his assessment.

As further evidence of the bill's obvious success, the President also noted that many teachers, nurses, firemen, and first responders were not among the 651,000 newly unemployed during the month of February.

This was a thinly veiled attempt to draw emotional support for the cause:

• "...teachers who are still able to teach our children because we passed this plan."
  
• "...nurses who are still able to care for our sick..."
• "...firefighters and first responders who are still able to keep our communities safe."

My complaint remains unchanged: the poorly-named American Recovery and Reinvestment Act does extremely little to actually stimulate the economy. Paying for 25 new police officers salaries for 10 months does not address the core issue in Columbus, Ohio - insufficient budget to pay for the salaries itself.

On the other hand, if an operating environment were fostered that actually encouraged businesses to expand, that would be change I could believe in. Change with long-lasting effects. Those businesses would need to hire new people. Those people (and the companies) would pay more taxes, helping the City of Columbus pay for their own police force. But that's not all - those employees, including the new cops, would buy things from other businesses, lifting the entire local economy. They would also be able to pay their mortgages, removing a painful burden that has been set upon our shoulders.

If President Obama's stated objective is to be believed, shouldn't he begin pushing for and enacting policies that will encourage real growth and strength? Policies like corporate tax rates, regulatory barriers that make it difficult for American companies to compete globally, and trade imbalance?

I'm not a conspiracy theorist, but there appears to be an agenda at work here. What other explanation is there for ignoring the obvious? For ignoring the will of the people? 300 million of us can't be wrong.

Big government = broke (and broken) nation

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* Lots of interesting talk here about the cost to taxpayers of operating Air Force One, plus a (short) special investigative Congressional report on the topic by a then-minority Representative Henry Waxman. Waxman's attempt to cast Bush/Cheney in an unfavorable light is no more relevant than is an argument that Obama shouldn't be flying around unnecessarily on our dime.

I am of the opinion that the costs of presidential travel are largely fixed. The planes, the pilots, support crew, security, Secret Service, etc., are all expenses that would be incurred even if the POTUS stayed in bed all day. The only significant variables are fuel and accommodations at the destination (security and otherwise).

In other words, while I sought out and found interesting the estimated cost per hour of operating Air Force One, I don't believe it to be a strong argument against Obama for his trip to Columbus.

A Not-So-Stimulating Post

When I got my first Palm Pilot many years ago, it had a little "Sim-city" game on it. The idea of the game is to build a city from scratch. The city's growth depends on factors such as amenities, infrastructure and taxation. I very quickly figured out how to game the system and was able to achieve whatever level of success I wished. The key was taxes. If I lowered taxes to some insanely low rate, tons of people moved into my city. I found that I could then hike taxes to some insanely high rate for short periods of time and collect A LOT of money while everyone moved away over the course of several weeks. By then I had enough capital to add features to my city and drop the tax rate once again, attracting even more new citizens than before, only to raise taxes all over again. The game became meaningless for me and I never played it again. 

In reality, citizens would probably not behave in the same manner as the simulation, but the lesson remains the same: there is an optimal balance between a fair tax rate and the public services rendered in return. That balance was boring in my game, as my city only grew at a slow and steady pace, which is what led me to the extreme taxation tactics.

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YourDictionary.com defines "stimulus" as "something that rouses or incites to action or increased action; incentive".

We've been inundated with stimulus-related news over the past several days and weeks. Considering only the recent $787 billion "stimulus" package that was signed into law this past week, if the tax burden were spread equally among all inhabitants of the United States, we would each be forking over about $2,600 to fund the cost. I have five people in my family, so that's $13,000. Of course, we all know that the burden will not be shared equally. In fact, many will not contribute anything whatsoever, yet those are some of the greatest beneficiaries of the new spending.

I say "spending" because that is how the bill (now the law) should have been termed. There is very little that is actually stimulating about it.

The Oregonian published a front-page graphic on Wednesday to highlight all of the "help" that we can expect from the new law. This is not a comprehensive list of the package.

• Tax breaks - $15 less taxes per week, or about $780/year
  
• Housing - An $8,000 tax credit for first-time home buyers
  
• Car - New car/truck buyers can deduct sales or excise taxes
  
• Energy - Up to a $1,500 tax credit for energy-efficient home upgrades
  
• Tuition - $2,500 in tax credits to offset qualifying higher ed. expenses
  
• Unemployment - Extended benefits

My assertion that "spending" as an appropriate description is supported by this explanation from the Associated Press:

At its core, the legislation is designed to ease the worst economic recession in generations, and combines hundreds of billions of dollars in new spending with tax cuts. Much of the money would go for victims of the recession in the form of food stamps, unemployment compensation and health care. There are funds, as well, for construction of highways and bridges.

//news.yahoo.com/s/ap/congress_stimulus - as of 2/6/09 6:10 PM

The emphasis is mine. Here comes my trademark rant:

First off, I am not calling into question the need for tax credits or social services or even unemployment benefits. That is not the issue at hand - which is exactly why those pieces should not have been included in a "stimulus" bill - they do not stimulate anything. They are spending programs - in fact, they are existing spending programs with existing funding methods. They do not belong in a stimulus bill. 

Suppose for a moment that the food stamp program were funded such that every single resident participated. Would that help grocers sell more food? Would it do anything at all to stimulate the economy?

Similarly, consider unemployment funding - paying people to not work, not produce, not contribute to GDP.

Every dollar that goes into any of these programs comes out of the pocket of the taxpayer. Take a dollar from me and give it to someone in the form of a food stamp. Almost. You still need to cover the administrative costs of the program. Take a dollar from me and give someone $0.85 worth of food stamps. That is not stimulating.

Next we have the housing, new car, energy and education pieces. I'm still making payments towards my student loan. I was able to claim some tax credits while I was going to school and I can still write off the student loan interest. Why should I now pay up to $2,500 MORE for someone to go to school and ultimately compete for my job? What happened to Pell grants and Stafford loans? Why does the bill incentivize people to go to school and remove themselves from the workforce? Will that artificially drive the unemployment rate down and become a feather in someone's cap?

If someone can afford to buy a house, the deal can be done - despite what you may have read about frozen credit markets. Why should I pay someone $8,000 to buy the vacant house next-door? Why should I subsidize my neighbor's new car purchase? or his new air conditioner or windows?

Show me a person that goes out and purchases a new home or car due to the new "stimulus" benefit attached to each and I will show you a fool. Taxpayers paying for their neighbors to have new stuff is not stimulating. Aside from that $15 injection/week of new disposable income from "millions of workers", it is a BIG stretch to call most parts of that shameful bill a "stimulus". 

Economic growth will come about through employment and productivity - not through welfare. When people work, they can afford to buy things like houses and cars and heat pumps. They can buy their own food and pay for their own textbooks.

$787 billion (remember, that is just one of the many "bailouts" thus far) could have been used to "rouse or incite" an unimaginable amount of real stimulus through lower taxes. I don't mind paying my fair share of taxes to live in this country. I'm talking about corporate taxation. Companies employ people. The stimulus could have been used to attract new business to the U.S., to encourage production increases, to employ more people.

Instead we've got anti-business solutions such as Sarbanes-Oxley and carbon credits. Can you really blame companies for outsourcing off-shore or moving their operations to more favorable environments?

If everyone worked for the government, it could not survive one month. For every dollar it pays out in a wage, it receives back just $0.15 from that employee's taxes (assumes 15% tax bracket). This is why government spending programs are not sustainable. This is why socialism always fails. The government must collect taxes from the private sector in order to survive. The larger the private sector, the more taxes there are for the government.

It's just like my Sim game.

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I don't really enjoy writing about this stuff. I'm just blowing off some steam after witnessing another huge decline in my retirement account this past week. 

The economy will eventually recover. There are a few signs already pointing in that direction. And when things do return to normal, you can bet certain people will be there to falsely accept the credit for said recovery. But the fact is, economic cycles are a natural occurrence. The government should never have interfered with the free markets. Now, instead of a pothole or two to navigate, we now have to cross Hell's Canyon on a questionable Indiana Jones-like rope bridge.